ORLANDO, Florida, March 24 (Reuters) - TRADING DAY

Nasdaq notches third-biggest rise this year

The last full trading week of the quarter got off to a roaring

start across most major stock markets on Monday, with investors

buoyed by reports that the Trump administration's tariff blitz

scheduled for April 2 may not be as heavy as feared.

A solid pick-up in U.S. business activity helped cement the

positive tone on Wall Street, and investors bought back some of

the shares they'd aggressively sold off recently like Big Tech.

Europe ended largely flat, but benchmark Asian, U.S. and

global equity indices all rose sharply. Bond yields spiked

higher, while 'safe-haven' gold fell for a third day to clock

its longest losing streak since November.

All 10 sectors in the S&P 500 rose, led by a 4% surge in

consumer cyclicals on hopes that a more targeted approach to

tariffs means goods prices won't rise so much. That was the

sector's biggest rise since November 2022.

Some of the biggest individual gainers on Wall Street were

in tech, led by a 12% surge in Tesla.

If trade tensions cool, could investors look at U.S. assets

in a more positive light? I'll dig into broader U.S. capital

flows trends below, but first, a round-up of Monday's

markets.

Today's Key Market Moves.

* Wall Street's main three indices and the MSCI World hit

two-week

highs. The tech-heavy Nasdaq posts the biggest gain, rallying

2.3%.

* Shares in Tesla surge nearly 12%, their biggest

rise

since November 6, the day after U.S. President Donald Trump's

election win.

* Gold continues to drift from its record high, down 0.5%

but

crucially holding above the $3,000/oz mark.

* The yen is the biggest decliner among major currencies.

Dollar/yen rises almost 1% to push convincingly back above

150.00 to a three-week high of 150.75 yen.

* Yields rise across the U.S. Treasury curve, up almost 10

basis

points at the short end to flatten the curve slightly. The

two-year yield registers its biggest rise since January 10.

Trade war fears haven't dissipated completely and the

situation remains extremely fluid. While Trump said on Monday he

may give a "lot of countries" breaks on tariffs, he still plans

to announce more in the next few days on cars, and then on

lumber and chips further down the line.

And any hopes of inflation relief from less of a blanket

approach to tariffs from Washington may be tempered by another

rise in oil prices after Trump said he will impose a 25% tariff

on countries that buy oil and gas from Venezuela.

The price of Brent and WTI crude futures rose more than 1% on

Monday to the highest in three weeks. That was the fourth daily

increase in a row.

If Monday was a slightly more optimistic day for investors

regarding global trade tensions, it was less encouraging on the

interest rate front.

Atlanta Federal Reserve President Raphael Bostic said on Monday

he now only sees the central bank delivering one quarter

percentage point rate cut this year because he expects inflation

won't come down as quickly as hoped.

Bostic had previously expected the Fed would cut rates twice

this year. That remains the median view across the Fed's 19

policymaking officials as last week's revised projections

showed, but the underlying weight of views is shifting.

In Asia, meanwhile, details emerged of Beijing's latest attempts

to maintain strong relations with many of the world's biggest

businesses. China's economy tsar, Vice Premier He Lifeng, met

with the heads of Apple, Pfizer, Mastercard, Cargill and others

on Sunday.

There's no doubting the huge improvement in investor sentiment

towards China following the fiscal and monetary measures

announced by Beijing since September, and China's markets look

set to end the quarter on a high note.

Foreign demand for U.S. assets might not be dead yet

As the first quarter draws to a close, financial markets are

at a crossroads. We could be seeing the early stages of a

tectonic shift in global investment flows, with a dramatic

decline in demand for U.S. assets from abroad. But it's also

possible that this is simply a pause and that the 'U.S.

exceptionalism' narrative has more chapters to go.

Net sales of U.S. equities by foreign central banks reached

$28 billion in January, and net sales of all U.S. assets by the

private sector totaled $74.8 billion, according to official

Treasury International Capital flows data.

These were, respectively, the fastest-ever pace of U.S.

equity selling by the official sector in a single month, and the

biggest monthly outflow of U.S. assets by private sector

investors in a year.

This abrupt reversal in flows goes a long way to explaining

the eye-opening underperformance of U.S. stocks against the rest

of the world so far this year. This gap has approached 15

percentage points in the past few weeks.

Of course, one month does not a trend make, and it will take

many more months of similar flows to reverse the tide - or more

accurately, the tsunami - of foreign capital that flooded into

U.S. markets in recent years.

TIC data shows that private sector net capital inflows into

U.S. stocks and bonds last year totaled $980 billion, following

a net inflow of $668 billion the year before and $1.6 trillion

in 2022. That's net purchases from overseas investors and net

selling of foreign assets by U.S. investors.

The total figure is worth repeating. In the last three

calendar years, private sector investors poured a net $3.25

trillion into U.S. assets. Little wonder that foreign investors

at the end of last year owned 18% of U.S. stocks, according to

Goldman Sachs. That's a record-high share going back to 1945.

At an average of more than $1 trillion a year, that pace of

net inflows was unlikely to be maintained. But does that mean

that January's pace of selling will persist? Not necessarily.

PARADIGM SHIFT?

Goldman Sachs' chief U.S. equity strategist David Kostin and

his team estimate that foreign investors will remain buyers of

U.S. equities this year, lured by the weaker dollar, attractive

prices due to the recent correction, and the unparalleled

liquidity of U.S. markets.

They reckon overseas investors will be just as committed

this year as they were last year, buying a net $300 billion

compared with $304 billion in 2024. They do note, however, that

"elevated political and economic uncertainty also create

elevated uncertainty around that forecast."

Appetite for U.S. assets will remain strong as long the U.S.

maintains an innovation-friendly tax system, flexible financial

system, commitment to property rights and a relatively low

regulatory burden, agrees Standard Chartered's head of G10 FX

strategy Steven Englander.

"Cyclical ups and downs in equity and other asset prices

would not erase this attractiveness in the long term, even if

the correction in U.S. equities continues, provided the

underlying positives remain in place," he says.

It is important to note that TIC flows reports are released

with a lag, meaning January's outflows don't account for the

notable market shifts seen in recent weeks. The February and

March reports could show massive outflows too.

There are good reasons why foreign investors have backed

away from U.S. assets in recent weeks - stretched valuations,

market concentration, the emergence of China's DeepSeek

artificial intelligence model, Germany's watershed fiscal

U-turn, and concern surrounding the Trump administration's trade

and foreign policy agendas.

This is all to say it remains unclear whether the recent

shift in investment flows is temporary or represents a true

paradigm shift. The next few months will be critical.

What could move markets tomorrow?

* South Korea consumer sentiment (March)

* Hong Kong trade (February)

* Taiwan industrial production (February)

* Bank of Japan minutes from January 23-24 policy meeting

* UK inflation (February)

* Germany Ifo business sentiment index (March)

* U.S. consumer confidence (March)

* U.S. 2-year Treasury note auction

* U.S. Fed's Adriana Kugler speaks

* U.S. Fed's John Williams speaks

If you have more time to read today, here are a few articles

I recommend to help you make sense of what happened in markets

today.

1. Some European officials weigh if they can rely on

Fed

for dollars under Trump

2. Don't count out a Trump trade détente: Stephen

Jen

3. Transatlantic rift might spur euro reserve

holdings

4. First-quarter US earnings outlook looks less rosy

with

tariff worries in focus

5. US retailers haggle with suppliers after Trump

tariffs

I'd love to hear from you, so please reach out to me with

comments at . You can also follow me at [@ReutersJamie and

@reutersjamie.bsky.social.]

Opinions expressed are those of the author. They do not reflect

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